Friday, 5 August 2016

Edward Lucas wrote a reasonable and well argued article in The Times arguing against SDLT and in favour of Land Value Tax (via MBK). The comments are a rich seam of KLNs, clearly the Homeys have a ready made list of this garbage which they fire off at every opportunity (I wonder whether any of them are cynical enough to cut and paste from the Killer Arguments blog..?).

I can't see anything new, but for the record, here they are...

Not everyone who owns their home is rich in terms of disposable income. Not everyone would be able to pay such a tax. What then?

Ghastly proposal. The main cause of high property prices is the imbalance between supply and demand. That demand has been created by excess immigration. Get net immigration down to zero, then let the property builders catch up.

"Taxing people to live in their own houses will cause howls of protest." Yes, it would indeed. Count me out.

The next crazy idea will be to tax them (on imputed taxi fares) to ride in their own cars, and similarly at restaurant rates for dinners at home. I suppose we could also tax a man sleeping with his wife on imputed brothel charges - and we could then prosecute HMG for living on immoral earnings.

House prices are too high relative to incomes because the last correction in the perpetual house bubble cycle never happened. The financial crisis got in the way. Interest rates were reduced to emergency levels meaning the cost of a large mortgage reduced. Now we are in trouble. It's been so long millions are up to the necks in large loans which they couldn't afford at normal rates, and the BOE knows it.

Articles like this imply it's a UK or South East problem. It's world wide and even in countries with plenty of space to build. What the article's conclusion is the implementation of a wealth tax. No thanks!

One of the reasons for the leave campaign was mass migration as it is one of the causes of the housing shortage. A classic example of the gap between the political class and the victims was the house of lords report on immigration - issued with a blank section on housing impact!

Daft article. Media columnists get paid about £200,000 per annum. I suggest you check your sums, Edward. Your house doesn't earn a bean until you sell it and then, where are you going to live?

Why not lead from the front, Edward. Sell your house, and use the proceeds to help some young people out. Or just make an extra donation to HMRC. I'm sure they will welcome it. Here's a newsflash for you. Older people tend to be wealthier than younger people because... get ready for it... they have lived longer and had more time to accumulate wealth. Tell you what, instead of screwing with the property market why not renounce your entitlement to (say) a state-funded pension?

Balmy [sic]. Looks like when in doubt tax. Whoever heard of a taxation which is effectively designed according to a birthdate except in Britain?

Don't you just love tax, solves everything a bit here a bit more there...which is never enough because we are still 1.5 trillion in debt thanks to the states profligacy with other people's money... Reducing what the state takes, the regulations it imposes etc etc would go a long way to improving things across the board and that includes housing. State interference is the problem not the solution.

"The real answer is to remove some of the economic rent (unearned income) from the lucky generation — mine and my parents’ — and transfer it to 'Generation Rent'". A few years ago, I read that low interest rates on savings, which finance cheap mortgages and loans, cost senior citizens, who comprise the majority of savers, some £17 billion a year. If correct, that sum seems to me to be a very generous subsidy given by senior citizens to the younger generation, in addition to which, senior citizens are often called on to act as the non-repayable loan bank of mum and dad, or, of grandma and granddad. They also often provide cheap accommodation and free child care for younger family members. I believe the sums involved represent more than sufficient subsidies from the older generation to the younger.

How about parents paying to house their children instead of expecting others to continue paying for them after they left home. Taking responsibility for one's own actions appears a stretch too far for some.

In order to stem over-breeding, full child benefits are given for one child, half benefits for two children (half for each child) and no benefits for any children if more than two are born.

This so called research is nothing more than a big pile of academic waffle grounded in theory and not in reality. A land-value tax will indeed penalize those who have larger houses or plots of land. But unless those same people divide up their homes into multiple units or sell off their gardens so that developers can build new homes on them - which they clearly won't - it really won't solve anything or help anyone. There is also the issue of how someone whose house value has appreciated, but whose wage has remained somewhat more static, is supposed to afford such a tax. Or are we suggesting that they are to be forced out of their homes? As for the suggestion that tenants of private landlords be allowed to force those same landlords to sell their properties, there is a name for this: legalized theft. As this is the United Kingdom and not the People's Republic of North Korea we can file that particular suggestion in the bin. The main issue with the housing market is strict regulation on building and development: you don't solve that by trying to damage demand, you solve it by looking at how such restrictions can be removed so that supply may increase.

The size and value of one's house is a very unreliable indicator of ability to pay more tax. Many pensioners, in particular, are house-rich while income-poor, while the increase in value of a property is not "income" until the owners downsize. However, abolishing the hated Stamp Duty would certainly encourage easier and more frequent house moves and downsizing.

The reason property prices are too high is low interest rates with ZIRP causing more harm than good. But that will never change as non performing loans would finally destroy our banks.

Fer cryin' out loud, just increase the supply. It's almost impossible to add new taxes without creating genuine suffering for some. In the case of a land tax (or the mansion tax, whose effect would have been similar) it's the asset-rich, cash poor who would suffer. In the case of capital gains tax, it's those with young families who need to trade up and get an extra bedroom or two - confiscation of their gain would make it impossible to afford to move up a rung, especially if we don't add indexation back in. More taxation is NOT a solution to high prices caused by lack of supply. Extra supply is the solution to high prices caused by lack of supply.

Imputed rent is madness. All owner occupiers are deemed to be paying market rent for the purposes of calculating GDP, and that imaginary money is imputed to the household services sector. But why stop there? Why not impute money to the restaurant sector for every meal you eat at home? Or to the prostitution sector for every time you make love with your partner? But to reintroduce real imputed rents is money is even more insane when so many people are also paying mortgages on top - and you seem to forget that millions are paying mortgages of 4-5% despite the base rate being below 1% .Why should people who have stretched to borrow and meet their monthly mortgage repayments also have to pay an imaginary rent in addition to their mortgages? You talk as if you want to encourage home ownership but all you really want to do is make it less attractive. This would just make property even more unaffordable for young buyers and destroy the dreams of millions of people that have made life plans around retiring in their own homes because their pensions could never cover this new rent. Why not just raid peoples homes and take their possessions, or empty the bank accounts of those with more than £5k in savings? What you're talking about is little more than theft. The only sensible idea is to abolish stamp duty, improve social mobility and build more homes. You will never think your way around the basics of supply and demand - we live on a small island with a chronic shortage of housing - solve that, stop dreaming up punishments for owner occupiers.

Tax foreign investors at higher rates of stamp duty. They are adding little benefit to the UK economy as most money will be repatriated and not spent here. Restrict their purchase to new build apartments which if flipped within 5 years are taxed heavily. Require them to submit proof of letting income by using estate agencies or else tax them at a higher rate if it is left empty, to stop the rent spiral as well as leaving huge numbers of apartments empty..

My house is on a plot of 1/3 acre, my four neighbours' houses are the same, but it is on a steep hill and we have many trees all of which are subject to preservation orders that the council rigorously enforce. Would we therefore be subject to a special tax because of the large plots even though their potential for development is limited?

[The only one in favour of the proposal] How refreshing to see an article promoting one of the mainstays of Adam Smith's economic theory. It is utterly crucial to the affordability and stability of housing market that people pay a charge for occupying land, as happens in almost of the developed world. It should be remembered though, for those that fear a property tax, that it should be implemented along with a flat income tax. The current lack of charge is what enables the feudal superiors to maintain their excessive hold on the UK property market. If the Duke of Westminster had to pay property taxes, would he still own vast swathes of Kensington and thousand of acres of farmland across the UK? Can anyone justify this concentration of land, and its value in one hand? In the early 1900's Sweden introduced a strong land tax, with a penalty for letting, alongside a flat income tax. This created the greatest redistribution of wealth the world has ever seen, and Sweden became one of the most prosperous, equal countries in the world. It is little wonder that the rest of the world's richest people invest in UK property, especially in London, when they can make 7% a year in asset growth, without any significant taxation, and so it's little wonder that medium and low earners cannot afford to live there.

A land value tax seems a particularly stupid and impractical idea to me. Apart from the fact that there are too many taxes already, how would the value of land be assessed? It depends entirely where it is and is extremely open to dispute, for example an acre of land in Chelsea is probably worth £billions whereas an acre of unproductive rough hill farm land in Wales has practically no value. And of course farmers who own most of the land anyway would have to be exempt as most farming requires subsidies to be viable.